The finance ministry has issued 14 Customs notifications giving effect to various export promotion schemes in the new Foreign Trade Policy (FTP). As usual, the notifications cause fresh confusions.

Para 5.1A of the Handbook of Procedures, Volume 1 (HB-1) says that the zero-duty Export Promotion Capital Goods (EPCG) scheme shall not be available to applicants, who avail in that year, the benefit of the Status Holder Incentive Scheme (SHIS) under Paragraph 3.16 of FTP.

The application form ANF 5A for EPCG authorisations calls for a declaration that the applicant firm/company has not availed and shall not avail the benefit of SHIS under Para 3.16 of FTP in the current year. The corresponding EPCG notification number 102/2009-cus, dated September 11, 2009, puts the condition that the importer does not avail, in the year of import of the goods, the benefit of SHIS under Para 3.16 of the FTP.

So, what is relevant? The year of application for zero-duty authorisation or the year when exports were made in respect of which SHIS benefit was claimed, or the year when the zero-duty imports were made? This must be clarified, as zero-duty EPCG authorisation may be obtained in one year and imports may be made in another year.

The notification number 104/2009-cus dated September 11, 2009, says that exports made under the zero-duty EPCG scheme with effect from April 1, 2010, shall not be considered for computation of entitlement under SHIS. The FTP suggests bar of EPCG authorisation, if SHIS availed.

Para 5.2A of the FTP suggests that spares can be imported at zero duty up to 10 per cent of the existing plant and machinery, imported even under EPCG authorisations issued earlier, whereas serial number 3 of the table annexed to the notification number 102/2009-cus dated September 11, 2009, seems to suggest that the limit will apply to spares of plant and machinery imported the under zero-duty EPCG scheme only. This point also needs clarification.

The notification no. 102/2009-cus dated September 11, 2009, says that manufacture has the same meaning as defined in clause (f) of section 2 of the Central Excise Act, 1944, whereas Para 9.36 of the FTP defines manufacture very differently.

Para 5.1 of the FTP is explicit that the EPCG scheme will be available for exporters of engineering and electronic products, basic chemicals and pharmaceuticals, apparels and textiles, plastics, handicrafts, chemicals and allied products, and leather and leather products. The notification says that export obligation can also be fulfilled through royalty payments received in freely convertible currency and foreign exchange received for research and development (R&D) services and payments received in rupee terms for port handling services in terms of chapter 9 of the FTP.

The finance ministry has issued a separate notification number 101/2009-cus dated September 11, 2009, allowing zero duty EPCG scheme for Common Service Providers in towns of export excellence. Here again, the notification says that export obligation can be fulfilled through payments received in rupee terms for port handling services in terms of chapter 9 of the Foreign Trade Policy, although none of the ports have been mentioned as Towns of Export Excellence in Appendix-7 of HB-1.

The notifications need a thorough relook and the apparent inconsistencies with FTP must be sorted out and explained clearly.